The coal explorer said on Monday that the federal Department of Sustainability, Environment, Water, Population and Communities had deemed the development of the Colton resource as not a "controlled action" under the Environmental Protection and Biodiversity Conservation Act 1999 (EPBC Act).

As a result, the project would not require further assessment and approval under the EPBC Act before it could proceed, although Qld and local government environmental approval processes were ongoing, Northern Energy said.

Managing director Keith Barker said the federal government department's decision supported the company's view that the Colton project would not damage the local environment.

The company aims to commence production at the project in 2012 and has a sales agreement with its 12.7 per cent shareholder, China's Xinyang Group, for 65 per cent of production from Colton.

Northern Energy said it was undertaking further exploration drilling in the area with a view to increasing the reserve base of the deposit to support future operations and potential expansion.

Also on Monday, the company said it was considering a $193 million cash takeover offer from coal miner New Hope Corporation Ltd, which was launched on Friday.

The target's shares immediately soared, eclipsing
New Hope
's bid of $1.50 per share, indicating that the market believes a higher offer could result.